Stage Three Tax Cuts
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The stage three tax cuts are a taxation policy overseen by the
Australian Government The Australian Government, also known as the Commonwealth Government or simply as the federal government, is the national executive government of Australia, a federal parliamentary constitutional monarchy. The executive consists of the pr ...
, that came into effect on 1 July 2024. Originally forming the third and last stage of the Turnbull government's personal
income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
reforms, stage three was altered in the
Morrison government The Morrison government was the Australian Government, federal executive government of Australia, led by Prime Minister of Australia, Prime Minister Scott Morrison of the Liberal Party of Australia, between 2018 and 2022. The Morrison governmen ...
's 2019 budget to include an additional $90 billion of tax cuts. Stage three has been the subject of significant political discussion and controversy in Australian politics, and has been used as a
wedge issue A wedge issue in politics is any issue used to create a division within a political party. These issues are usually employed as a tactic by a minority party against a governing majority party, with the aim of splitting the majority's electorate i ...
. During the
2022 Australian federal election The 2022 Australian federal election was held on Saturday, 21 May 2022, to elect members of the 47th Parliament of Australia. The incumbent Morrison government, Liberal–National Coalition government, led by Prime Minister Scott Morrison, soug ...
campaign, the Coalition and
Australian Labor Party The Australian Labor Party (ALP), also known as the Labor Party or simply Labor, is the major Centre-left politics, centre-left List of political parties in Australia, political party in Australia and one of two Major party, major parties in Po ...
both stated their full support for retaining stage three, whereas the
Australian Greens The Australian Greens, commonly referred to simply as the Greens, are a Left-wing politics, left-wing green party, green Australian List of political parties in Australia, political party. As of 2025, the Greens are the third largest politica ...
and several independent MPs argued for its modification or abolition. In January 2024, the
Albanese government The Albanese government is the current federal executive government of Australia, led by Prime Minister Anthony Albanese of the Labor Party. The Albanese government was sworn in on 23 May 2022 by the Governor-General of Australia, David Hurl ...
announced modifications to stage three that reduced the overall cost and gave larger cuts to individuals earning under $200,000.


Timeline


2018

The original suite of tax cuts were legislated by the Turnbull government as the ''Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018''.'
Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 - Explanatory Memorandum
''
Stage three was set to take place on 1 July 2024. All three stages were part of the same legislation, with Treasurer
Scott Morrison Scott John Morrison (born 13 May 1968) is an Australian former politician who served as the 30th prime minister of Australia from 2018 to 2022. He held office as leader of the Liberal Party of Australia, leader of the Liberal Party and was ...
stating this was done to provide "certainty". Following amendments, the final legislation passed the
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entities. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often ...
with the support of the Coalition,
Bob Katter Robert Bellarmine Carl Katter (born 22 May 1945) is an Australian politician who has served as the member of parliament (MP) for the Queensland division of Division of Kennedy, Kennedy since 1993 and Father of the Australian House of Represent ...
and independent MP
Julia Banks Julia Helen Banks is an Australian lawyer and politician. Elected as the member for Chisholm in the Australian House of Representatives at the 2016 federal election, Banks was the only candidate for the governing Liberal-National Coalition ...
. The bill was opposed by Labor, the Greens and two independents; Cathy McGowan and
Andrew Wilkie Andrew Damien Wilkie (born 8 November 1961) is an Australian politician and independent federal member for Division of Clark, Clark (previously Division of Denison, Denison). Before entering politics Wilkie was an infantry officer in the Austr ...
.


2019

In the lead-up to the 2019 federal election, Labor made a number of criticisms of stage three. Shadow treasurer
Chris Bowen Christopher Eyles Guy Bowen (born 17 January 1973) is an Australian politician who has been Minister for Climate Change and Energy in the Albanese government since June 2022. He is a member of the Australian Labor Party (ALP) and was first elect ...
stated in April 2019 that it was "neither fair nor responsible to lock in billions of dollars of tax giveaways that disproportionately benefit a relative few - and so far into the future”. Shadow finance minister Jim Chalmers stated that "the last stage of tax cuts can only be funded by budget cuts". Following the Morrison government's victory at the federal election on 18 May, treasurer
Josh Frydenberg Joshua Anthony Frydenberg (; born 17 July 1971) is an Australian former politician who served as the treasurer of Australia and deputy leader of the Liberal Party from 2018 to 2022. He also served as a member of parliament (MP) for the divisi ...
handed down his budget. In it, the stage three tax cuts were modified to cut taxes by a further A$90 billion. This change brought the total cost of stage three to A$254 billion over the 2024-2034 period. The legislation was passed on 4 July 2019, and was entitled "Treasury Laws Amendment (Tax Relief so Working Australians Keep More of Their Money)". Opposition leader
Anthony Albanese Anthony Norman Albanese ( or ; born 2 March 1963) is an Australian politician serving as the 31st and current prime minister of Australia since 2022. He has been the Leaders of the Australian Labor Party#Leader, leader of the Labor Party si ...
unsuccessfully proposed amending the name of the bill to "Treasury Laws Amendment (Tax Relief So Working Australians Keep More of Their Money But Not For a Really Long Time)." Labor voted for the A$158 billion dollar tax plan in both chambers of parliament, but leader Anthony Albanese stated that they had done so as not to block the earlier stages from benefiting "working Australians". In the
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
, the legislation was supported by the Coalition, Labor,
Jacqui Lambie Jacquiline Louise Lambie (born 26 February 1971) is an Australian politician who is the leader and founder of the Jacqui Lambie Network (JLN). She is a Australian Senate, Senator for Tasmania since 2019, and was previously a Senator from 2014 to ...
and the
Centre Alliance Centre Alliance (CA), formerly known as the Nick Xenophon Team (NXT), is a centrist List of political parties in Australia, Australian political party based in the state of South Australia. It currently has one elected representative, Rebekha ...
, and was opposed by the Greens. Labor unsuccessfully proposed amending the legislation to delay stage three and bring stage two of the tax cuts forward.


2020

In September 2020,
The Australia Institute The Australia Institute is an Australian public policy think tank based in Canberra, with offices also in Hobart and Adelaide. Since its launch in 1994, it has carried out research on a broad range of economic, social, and environmental issues. ...
published a report stating that the majority of the stage two and three cuts would benefit the top 10% of earners.


2021

In July 2021, the Labor party held a party room meeting where they decided that if they formed government, they would retain stage three.


2022

After becoming Prime Minister,
Anthony Albanese Anthony Norman Albanese ( or ; born 2 March 1963) is an Australian politician serving as the 31st and current prime minister of Australia since 2022. He has been the Leaders of the Australian Labor Party#Leader, leader of the Labor Party si ...
ruled out altering or abolishing stage three. In August 2022, federal crossbenchers voiced their opposition to stage three. David Pocock,
Jacqui Lambie Jacquiline Louise Lambie (born 26 February 1971) is an Australian politician who is the leader and founder of the Jacqui Lambie Network (JLN). She is a Australian Senate, Senator for Tasmania since 2019, and was previously a Senator from 2014 to ...
, Dai Le, Monique Ryan,
Bob Katter Robert Bellarmine Carl Katter (born 22 May 1945) is an Australian politician who has served as the member of parliament (MP) for the Queensland division of Division of Kennedy, Kennedy since 1993 and Father of the Australian House of Represent ...
and
Andrew Wilkie Andrew Damien Wilkie (born 8 November 1961) is an Australian politician and independent federal member for Division of Clark, Clark (previously Division of Denison, Denison). Before entering politics Wilkie was an infantry officer in the Austr ...
stated that stage three should be abandoned, and
Rebekha Sharkie Rebekha Carina Sharkie ( Che; born 24 August 1972) is an Australian politician and member of the Centre Alliance party. She is a member of the Australian House of Representatives, representing the Division of Mayo in South Australia. At the 2 ...
stated that the timing of stage three "should be reconsidered".
Pauline Hanson Pauline Lee Hanson (''née'' Seccombe, formerly Zagorski; born 27 May 1954) is an Australian politician who is the founder and leader of One Nation, a right-wing populist political party. Hanson has represented Queensland in the Australian S ...
stated her support for stage three being implemented. In the same month, the Parliamentary Budget Office released a report, commissioned by the Australian Greens. The report stated that stage three would provide around twice as much benefit to men as to women, and that 48% of the benefits of stage three would go to those earning above A$180,000. In October 2022, former Prime Minister
Malcolm Turnbull Malcolm Bligh Turnbull (born 24 October 1954) is an Australian former politician and businessman who served as the 29th prime minister of Australia from 2015 to 2018. He held office as Liberal Party of Australia, leader of the Liberal Party an ...
stated that he did not believe the cuts should be implemented, due to their cost, and that Labor had made a mistake by committing to implement them at the 2022 federal election.


2023

Independent members of the Australian Parliament advocated for restructuring of stage three, including Dai Le, David Pocock and Monique Ryan.


2024

In January, the
Albanese government The Albanese government is the current federal executive government of Australia, led by Prime Minister Anthony Albanese of the Labor Party. The Albanese government was sworn in on 23 May 2022 by the Governor-General of Australia, David Hurl ...
announced changes to the stage three tax cuts. The changes mean that individuals earning between A$45,000 to A$150,000 (the median taxpayer earning around A$59,000 in FY2024-25) will pay A$804 less tax compared to the previous stage three plan. For those earning over A$200,000, the cut is reduced by half.


Details


Stages one and two

Stage one (Schedule 1 of ''Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018) i''s the Low and Middle Income Tax Offset (LMITO, nicknamed the "lamington"), along with some changes to the Low Income Tax Offset (see Income tax in Australia - Low income tax offset). The LMITO is a separate and temporary tax rebate introduced by the
Morrison government The Morrison government was the Australian Government, federal executive government of Australia, led by Prime Minister of Australia, Prime Minister Scott Morrison of the Liberal Party of Australia, between 2018 and 2022. The Morrison governmen ...
in July 2019 and is available for the 2018–19, 2019–20, 2020–21 and 2021–22 income years only. The maximum amount of LMITO is $1,080, it cannot reduce tax liability below zero dollars, and the offset cuts out when taxable income reaches $126,000. The LMITO does not reduce the Medicare levy. Further changes in 2019 increased the LMITO from the 2018 legislation. Stage two (part of Schedule 2) involves lifting the thresholds for the 19% and 32.5% marginal tax brackets. As initially legislated, the upper threshold for the 32.5% bracket would rise from A$87,000 to A$90,000 in 2018, and to A$120,000 in 2022, while the upper threshold for the 19% bracket would rise from A$37,000 to A$41,000 in 2022. Further changes in 2019 increased the upper threshold of the 19% bracket further to $A45,000, and brought the remaining stage two changes forward to 2020. Tax rates are as listed for Australian residents.


Stage three

The stage three tax cuts (part of Schedule 2), as initially legislated (not including temporary stage one changes, and stage two changes) would have kept the lowest two brackets the same (A$1-$18,200, and A$18,201-$45,000), but would have merged the next two brackets to create a bracket from A$45,001 to A$200,000 that would have been taxed at a lower
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rate of 30%. The threshold for the top tax bracket would have been increased from A$180,001 to A$200,001. The revised stage three tax cuts from the Albanese Government keeps all five tax brackets. The tax rate for the second lowest bracket (A$18,201-$45,000) will be reduced from 19% to 16%, while the third lowest bracket will cover incomes from A$45,001 to A$135,000 (A$45,001 to A$120,000 before stage three) and be taxed at a rate of 30%. The two highest brackets will be taxed at their current marginal rates, but will have higher thresholds, only applying for incomes above A$135,001 and A$190,001, compared to A$120,001 and A$180,001 before stage three. Tax rates are as listed for Australian residents.


Response to changes


Coalition

The Coalition has accused Albanese and the government of lying and breaking an election promise by changing aspects of stage three. Deputy Liberal leader
Sussan Ley Sussan Penelope Ley (pron. , "Susan Lee"; ; born 14 December 1961) is an Australian politician who is the current Leader of the Opposition (Australia), Leader of the Opposition and Leader of the Liberal Party of Australia, leader of the Liberal ...
stated that Labor "lied about these tax cuts", and shadow Treasurer Angus Taylor stated that the decision was "the mother of all broken promises”. Initially, several figures in the Coalition suggested that they would oppose the government's changes. On 23 January, Taylor stated that the Coalition would "absolutely not" support any changes to the tax cuts. On 25 January, Ley stated that the Coalition's position was to "support the existing stage three arrangements", and opposition leader
Peter Dutton Peter Craig Dutton (born 18 November 1970) is an Australian former politician who served as the Leader of the Opposition (Australia), Leader of the Opposition and the Leader of the Liberal Party of Australia, leader of the Liberal Party from 2 ...
stated that the changes were significant enough that the government should hold an election to get a mandate for them. On 26 January, Dutton stated that the Coalition was wanting to "understand the costings" before making a decision about supporting the changes. On 6 February 2024, the Coalition announced that they would support the government's amended legislation in Parliament. The legislation passed through the House of Representatives on 15 February, and passed through the Senate in an evening sitting of 27 February.


Greens

Greens leader Adam Bandt stated on 26 January 2024 that the changes to stage three were not sufficient for assisting low- and middle-income earners.


Public opinion

A poll conducted by
The Australia Institute The Australia Institute is an Australian public policy think tank based in Canberra, with offices also in Hobart and Adelaide. Since its launch in 1994, it has carried out research on a broad range of economic, social, and environmental issues. ...
in September 2022 found that 41 percent of respondents supported a repeal of the stage three tax cuts, while 22 percent were opposed. Another poll by the Australia Institute in October 2023 found that in a cohort of voters informed of the cost to the budget and who benefitted from the tax cuts, 25% of respondents supported repealing the tax cuts, and 44% stated they should be restructured. 17% were in favour of retaining stage three in an unchanged form. After the Albanese government announced changes to the tax cuts in January 2024, a poll by
Newspoll Newspoll is an Australian opinion polling brand, published by ''The Australian'' and administered by Australian polling firm Pyxis Polling & Insights. Pyxis is founded by the team led by Dr Campbell White, who redesigned Newspoll's methodology ...
found that 62 percent of those surveyed were supportive of the changes. Polling by the Australia institute in the Division of Dunkley in the lead-up to the 2024 Dunkley by-election found that 66% of residents surveyed supported the government's changes to stage three. The Australian Industry Group called for a reduction in the next minimum wage increase due to the redesign of the stage three tax cuts, arguing that workers would receive 2% more money, adding to inflationary pressures. The Fair Work Commission previously decided in 2019 that it would not be appropriate to directly reduce the minimum wage increase that year from the Low and Middle Income Tax Offset.


References

{{reflist Albanese government Morrison government Turnbull government Tax legislation Taxation in Australia


External links


Stage three Tax Cut Calculator